Can the BRICS Make a Difference At Busan? – Part 1

WASHINGTON, Nov 11 2011 (IPS) - As shock waves from Greece’s economic crisis emanate across the Eurozone and the Occupy protests in the U.S. grow bolder in their critique of the dominant neoliberal system, it seems clear to many observers that the old hegemonic economic order is fading fast. Still, promises made years ago by these afflicted developed and industrialised nations – such as aid pledged to the global South – remain intact and the question of who will honour these commitments has become the veritable elephant in the global economic arena.

As over 2,000 government delegates and experts gear up for the fourth high-level conference on aid effectiveness slated to run from Nov. 29-Dec. 1 in Busan, South Korea, calls for emerging market economies – particularly South-South cooperative groupings like BRICS (Brazil, Russia, India, China and South Africa) – to take the reins of global development are reverberating across continents.

According to the World Bank, the BRICS countries pledged 26 billion dollars in loan commitments to the developing world between 2000- 2008, the bulk of which came from China.

Between them, the BRICS hold roughly 4.3 trillion dollars in hard cash reserves, three-quarters of which sit in Chinese banks. By 2014, these countries will account for 60 percent of world economic growth.

Yet they have hitherto been slighted by the traditionally wealthy Northern economies, particularly in the realm of development aid and assistance.

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According to the Centre for Chinese Studies (CCS) at the Stellenbosch University in South Africa, “The 2005 Paris Declaration was issued against the background of the North-South divide; the Accra agenda in 2008 was extended only slightly to include some weak statements on South-South cooperation.”

This year, while the U.S. and the European Union are busy slashing their official development assistance (ODA) to low income countries, the BRICS will likely be called upon to fill the commitment gaps.

For example, aid to Africa will be a priority item on the menu in Busan, since the continent is home to 33 of the planet’s 48 least developed countries (LDCs). According to the U.N.’s most recent estimates, 50 percent of sub-Saharan Africa lives on less than 1.25 dollars a day.

This situation has been exacerbated by developed nations’ failure to comply with the 1970 U.N. General Assembly Resolution mandating rich countries to allocate 0.7 percent of their gross national income to developing countries. In the midst of severe domestic crises, the developed world is unlikely to pick up the tab now, adding more pressure on the BRICS to foot the bill.

“The significantly increased importance of China in global trade and investment is widely recognised. Russia matters not only because of its size but also because of its role as oil exporter and therefore ability to build up sizeable reserves,” Jayati Ghosh, a leading international development economist based at the Jawaharlal Nehru University in New Delhi, told IPS.

“India’s potential role is much greater than its current one, (and) South Africa and Brazil are not only the largest economies in their respective regions but also closely involved in major regional networks like Mercosur and Nepad,” Ghosh said.

“Their coming together at present indicates their greater recognition of the need to connect independent of the nodal points earlier provided by the USA, Europe and Japan.”

In a rare example of collective action between BRICS’ two biggest rival, India and China issued a bilateral statement Wednesday urging Western countries to “adopt responsible macroeconomic policies to handle the issues of debt and financial stability properly”.

Published by Beijing’s finance ministry, the document (scroll down for English) encapsulated the outcome of the Fifth India-China Financial Dialogue, which closed Tuesday in New Delhi.

The statement recognised that, “The global economy is in a critical phase.” Criticising Eurozone for mismanaging its sovereign debt crisis and allowing ripple effects to touch the developing world, the statement added, “In emerging markets, where growth is relatively stronger, there are clear signs of a slowing as developments in advanced economies begin to weigh on (our) countries.”

However, this unity between the BRICS superpowers disintegrated quickly, as India’s finance ministry hastened to distance itself from the joint-statement’s sharp admonition of the West.

The document has since been conspicuously absent from any Indian media outlet, prompting many observers to reiterate lingering scepticism that the BRICS will be able to flex a collective muscle in the international arena, particularly since the countries’ geopolitical and socioeconomic strategies and priorities diverge so greatly.

“I see no basis for lumping these countries together,” Rajan Menon, chair of the department of international relations at Lehigh University told IPS. “Calling the BRICS a ‘grouping’ is an interesting sleight of hand – it gives the illusion of an entity capable of acting together. But I see no history of these countries being a cohesive collective.”

“If you take China out of the mix, what would be the residual capacity of the remaining countries to shape global outcomes? It would be hardly be comparable to other centres of power,” he added.

Indeed, trade patterns between the BRICS over the last decade bolster Menon’s analysis.

A recent study by the Brookings Institution found that Brazilian exports to China soared from 1.1 to 21 billion dollars between 2000 and 2010, while imports from China rose from 1.2 billion to 15.9 billion dollars in just nine years.

But while China is now Brazil’s primary trading partner, Brazil does not even rank in the top 10 of China’s partners.

“The BRICS have not yet demonstrated a collective agenda,” Menon said, “and until they do, positing them as a pressure group seems to be a little overdone.”

*This is the first of a two-part series on the BRICS countries and how their development and political agendas will influence the future of aid.